TiVo 1Q net loss widens as higher costs wipe out 11 percent revenue increase

By Deborah Yao, AP
Wednesday, May 26, 2010

TiVo loss widens on legal costs, other expenses

PHILADELPHIA — Digital video recorder pioneer TiVo Inc. on Tuesday reported a net loss in the first quarter — its sixth straight money-losing quarter as the company struggled with higher legal expenses and other costs that wiped out an increase in revenue.

While TiVo has a loyal following among hardcore TV fans who believe its user guide is superior to those offered by cable boxes, the company has had a history of losses typically resulting from higher hardware and research and development costs. Now, a six-year lawsuit against satellite TV company Dish Network Corp. for allegedly infringing on a DVR technology patent is taking a toll on the bottom line.

In recent years, TiVo has been lessening its dependence on DVRs sold directly to consumers as the main source of revenue by licensing its software to subscription TV operators such as cable company Comcast Corp., or letting them use its DVRs as their own, such as the case with RCN Corp., another cable provider. TiVo also has slashed prices on DVRs to consumers and marketed the units through more retailers.

On Tuesday, the company for the first time said it would incorporate its software into Internet-enabled Insignia TV sets, a brand from Best Buy Co. as it staves off competition from the likes of Google TV, a device that hooks up to a set-top box to bring the Web to the television.

“We are trying to make sure that TiVo has every possible path to framing the TV experience,” said CEO Tom Rogers in an interview with The Associated Press.

In the first quarter, TiVo lost $14.2 million, or 13 cents per share, in the quarter that ended April 30. In the same quarter last year it lost $3.9 million, or 4 cents per share.

TiVo incurred higher legal expenses as part of its lawsuit against Dish, a recurring cost that the company said will hurt the second quarter as well.

Revenue rose 11 percent to $61.4 million. Excluding hardware revenue, service and technology revenue came to $43.2 million, down from last year’s $48.5 million.

The results were better than the forecast of analysts surveyed by Thomson Reuters. They were expecting a loss of 16 cents per share and service and technology revenue of $42.8 million.

In the second quarter, TiVo is expecting a net loss of $17 million to $19 million and service and technology revenue of $40 million to $42 million. That would be worse than what analysts have been expecting, which is a loss of $14.6 million and service and technology revenue of $42.6 million.

Rogers said higher legal and R&D costs will hurt profitability in the quarter. Earlier this month, a federal appeals court gave Dish a lifeline after granting a full-court review of a decision by a three-judge panel of the same court that sided with TiVo. If Dish was denied the review, it would have had to cough up $300 million in damages and risked having to disable millions of its DVRs because they were found to have infringed on TiVo’s patent. But TiVo expects to prevail.

“The good news is every court that has looked at this … we have resoundingly won” the case, Rogers said. “We plan to win here.”

The earnings report came out after TiVo shares closed at $9.15, up 10 cents, or 1.1 percent, on the day. In after-hours trading the shares fell 1.9 percent to $8.98.

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